When a stock's share price is lower than a North Dakota thermometer in February, investors tend to give it the cold shoulder. But as the market warms to a stock's prospects, its price can heat up in a hurry. Alas, you can rarely tell that a stock is melting investors' hearts until after it's made that upward leap.
Taking the market's temperature
But Motley Fool CAPS' proprietary ratings, aggregated from the opinions and accuracy of 145,000-plus members, offer a great way to monitor investor sentiment. Following a CAPS rating trend can help us determine the best time to invest. Let's look at previously rated one- or two-star companies that have recently enjoyed a bump in investor confidence and see whether they're truly heating up -- or headed back to the deep freeze.
|
Company
|
CAPS Rating
(out of 5)
|
Recent Price
|
EPS Estimates
(This Year - Next Year)
|
|
Citigroup (NYSE: C )
|
***
|
$3.25
|
$0.08 - $0.35
|
|
Cray (Nasdaq: CRAY )
|
***
|
$4.98
|
NA - $0.37
|
|
DragonWave (Nasdaq: DRWI )
|
***
|
$12.05
|
$0.64 - $0.60
|
|
Lear Corp. (NYSE: LEA )
|
**
|
$69.00
|
($3.03) - $2.09
|
|
SRS Labs
|
***
|
$7.11
|
$0.13 - $0.32
|
Source: Motley Fool CAPS. EPS = earnings per share.
Obviously, this is not a list of stocks to buy -- just a starting point for further research. Yet if some of the best investing minds are taking notice of these stocks, maybe we should, too.
Caution: Contents may be hot
Wireless network equipment maker DragonWave saw sales surge more than 400% last quarter as Clearwire built out its microwave network. The company accounted for more than 82% of DragonWave's revenue, but analysts expect that to contract somewhat as Clearwire diversifies its vendor base.
While that seems worrisome at first glance, DragonWave's other customers increased their sales 25% in the quarter and it could end up the winner in bidding for the business from AT&T (NYSE: T ) and Verizon (NYSE: VZ ) , which are also seeking to expand their networks. Expect to see backhaul specialist Ceragon Networks (Nasdaq: CRNT ) competing for the contracts, too.
Highly rated CAPS All-Star GorillaGorilla is looking for DragonWave to capture much of the market. Here's an excerpt:
Basically all those smartphones you love playing with are creating large amounts of data requirements - in fact soon it will be too much for the network to handle. Telecoms are going to have to upgrade the bandwith from telcom towers back to the main network.
A solution to this is [DragonWave] microwaves that allows you to pass upto 5GB of information from control towers back to your core network. They reckon they can do it cheaper over medium and longer distance than fiber (cheaper to buy and operate according to DRWI) and have the added bonus of being flexible over the amount of bandwidth they transfer.
Play it again, Sam
With China surpassing the U.S. as the world's largest auto market, and the government encouraging further sales by cutting in half the tax on the fuel-efficient cars the Chinese people buy, it would seem intuitive to buy China auto parts suppliers. Yet investment guru Jim Cramer thinks the better investment is in American auto parts, specifically vendors like Lear Corp. and Johnson Controls, because U.S. car manufacturers are building up depleted inventories and that will result in increased parts sales. Seems like sound reasoning.
As Lear only recently emerged from bankruptcy reorganization, the CAPS community is just getting back behind the wheel on the stock, but 10 of the 13 members rating the auto parts supplier think it will outperform the market in the months ahead.
Why not head over to the Lear CAPS page and rev up its engines again with your opinion on whether it can drive forward.
Checking the mercury
Are these stocks invitingly warm or bitterly frosty? It pays to start your research on these stocks on Motley Fool CAPS. Read a company's financial reports, scrutinize key data and charts, and examine the comments your fellow investors have made -- all from a stock's CAPS page. Then weigh in with your own thoughts on which stocks you think are hot little numbers, and which offer cold comfort. It's free to sign up.
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